Warriors Look to Increase Profits with New Arena

The Warriors’ proposed arena would create more space for events, provide short- and long-term work for local unions, and likely generate additional profits for the team’s owners.

“The idea of an 18,000-seat arena is quite exciting,” Bob Sauter, vice president and general manager of the SMG/Moscone Center, said. “We’re a convention center, so we wouldn’t compete with the arena at all. I believe our clients would see the availability of such an arena as very beneficial. We’d refer them to the Warriors.”

According to Sauter, Moscone Center clients often look for “new and exciting venue space. We’re just watching it (the effort to have the arena approved) with interest. We’re confident it’s going to come about.”

“We have been guaranteed an organized agreement with the team,” said Ian Lewis, research director for Unite Here! Local Two, which represents more than 12,000 hospitality workers in San Francisco and San Mateo counties. “Their commitment is all the food service jobs (will be contracted with us).”

According to Lewis, Local Two began negotiating with the Warriors a year and a half ago, after the team proposed the arena be located further north. “They reached out to us,” he said. “Now Oakland workers have won the commitment they’ll be able to keep their jobs. Many of our members also work at AT&T Park and the 49ers stadium in Santa Clara. The nature of these jobs is that they’re seasonal and very part-time. There’s no way you could make a living working at just one.”

Lewis said if Local Two members were guaranteed jobs in different seasons at the three venues it’d be more likely that they’d have year-round work with health care, a pension, and “decent wages. The waterfront has been a home base for great working-class jobs. It (the arena) is right in line with what San Francisco should be, not just jobs for college graduates.”

Other unions supporting the Warriors arena include Laborers’ Local 67, which represents workers who perform asbestos, lead, and mold abatement; Laborers’ Local 61, which fronts for construction and general laborers; Sheet Metal Workers’ Local Union No. 104; and International Brotherhood of Electrical Workers Local 6.

According to PJ Johnston, Warriors spokesperson, for most unions, “there won’t be contracts until we get the project approved and construction starts.” Johnston said the Warriors want to build partnerships with local entertainment companies to construct and operate the arena. “Nobody is better situated in the entertainment world than Peter Guber (Warriors’ co-owner). He wants to create a very San Francisco-specific entertainment experience.”

Guber is the chief executive officer of Mandalay Entertainment, a film production company, and chairman of Dick Clark Productions, which turns out the American Music and the Golden Globe awards.

Johnston said that the Warriors aren’t planning to house any other teams or sports at the arena.“It’s not going to be made for NHL hockey. We have no interest in going after the Sharks. Besides, hockey requires a bigger floor. The sight lines for basketball are better when there’s no hockey,” said Johnston.

According to Johnston, the Warriors want to house concerts, family-oriented shows, ice capades-type performances, awards ceremonies, and tech shows. He said the Warriors are looking to create “a state of the art” facility that’ll be on the cutting edge of technology when it opens in 2018.

Kenny Lauer, vice president of digital and marketing for the Warriors, said the company is in the process of determining what technology it wants to enhance audience experiences. “We are looking at pervasive computing. We’re creating some trials in the Oracle arena and testing them. We will be using sensors, determining the most efficient way to communicate data,” said Lauer.

“One of the things we’re looking at is how we use sound, how sound is captured and delivered to the fans who wouldn’t normally hear the sound. At a basketball game, if you’re not sitting at the court, you’re not hearing the squeak of the shoes, the bounce of the ball, and the banter between plays. We’re asking, “Could we capture all the sound of the court and deliver that to all those fans who wouldn’t normally hear it?”” said Lauer.

Lauer said the company is also looking at augmented reality, which involves layering a digital image over an image of the real world. Augmented reality would allow a smartphone user to point their phone at a player and determine the player’s score by period in the game. “How can we use it to provide more information to a fan?” said Lauer.

The Warriors draw sellout crowds to their existing Oracle arena.However, the venue, which is the oldest in the National Basketball Association, doesn’t have the technology amenities visible at other NBA arenas, such as touchscreens to order concession items, menus visible on video screens, self-piloted security robots, and bracelets that light up in a choreographed light show before a game.

Dan Rascher, president of Sports Economics, LLC, an Emeryville-based marketing research and economics firm for sports businesses, said the Warriors’ ability to own and operate a venue is likely to influence how much investment the team will make in the arena. “They will be able to secure loans with collateral of their own. They can use the upfront sales of new revenue streams to get a really low interest rate. They will have control over who gets the naming rights,” said Rascher.“The Warriors have done well in Oakland even when the team wasn’t doing well. They ought to be able to increase their revenues from 50 to 100 percent for the new building.”

According to Scott Andresen, founder of Andresen & Associates, P.C., a Chicago-based law firm focused on sports and entertainment, the Warriors’ potential profits depends on the team’s ability to get the maximum possible returns on parking, concessions, luxury boxes, permanent signage, and percentage of revenue for non-basketball events.“Every fan that walks into an NBA arena has a certain value. Now (since Oakland-Alameda County Authority and SMG manage the Oracle arena), the Warriors probably don’t get (a percentage) of anything other than tickets,” said Andresen.

Andresen said even with a new team-owned arena, the Warriors will face challenges. The team has a short history of success. The new arena will have no notoriety, unlike venues such as Chicago’s Wrigley Field. And the Warriors would have to be careful of selling long-term naming rights to technology companies that might not be around in 10 or 20 years.

Andresen said the Warriors can increase their profit potential by highlighting the number of people who show up. “You can insert acceleration terms, bumps, and special clauses (based on attendance). The creativity of your contract with sponsors is limited only by your sales staff and the ability of your lawyers to put it on paper. There is no such thing as “ridiculous” in sports contracts. The more seemingly absurd it is, the more people think it might just be crazy enough to work,” said Andresen.

For its part, the main group opposed to the proposed arena, the Mission Bay Alliance, insisted that its concerns are all about location. “We aren’t trying to prevent the Warriors from coming to the City,” Alex Doniach, Mission Bay Alliance spokesperson, said. “The Alliance wants to help the Warriors and the City find a site for the Warriors. The Alliance is really singularly focused on protecting UCSF from the Warriors arena.”